Friday, February 5, 2016

What (In Bankruptcy) KaloBios Is NOT Saying About Its Chagas Negotiations With The Savant Entities -- Shkreli's Cultural Persistence, There

There a few very important threshold points to understand here, before we get to the latest story, proper: (1) The acute cases of Chagas are a very serious and persistent threat -- but in a very limited geography. That geography, for the acute cases, mind you -- DOES NOT include the United States or its possessions. In fact, only seven acute cases have been documented in the United States, since the 1950s. [While there are people in the US who've seen the kissing bug (by which Chagas is transmitted -- seen at right), and have come into contact with the bug's feces, after a bite -- and thus express anti-bodies indicating exposure to Chagas -- not one of them has manifested as an acute case, in over two decades. See point (4).]

(2) There ALREADY is an effective treatment for Chagas, right now -- it was developed over three decades ago. It is being used (very economically, too) in most of Latin America -- by doctors, clinics and hospitals -- pursuant to delegated local, in-country authority, today. That effectively addresses the "acute case" threat, in those geographies.

(3) The tempest in the teapot here is that this old treatment was never FDA approved, for use in the US. But that matters almost not at all, because. . .

(4) Any patient in the US who might present exhibiting an acute case of Chagas could be treated with the drug now in use in Latin America, and safely, too. And now we are to the part that Martin Shkreli (still in-bankruptcy KaloBios' largest shareholder, by the way) and his minions are NOT telling you: under long-standing informal FDA practices, if an appropriately licensed and reputable doctor in the US were to prescribe the existing (Latin American) course of treatment to his or her acute patient, the FDA would almost certainly not intervene. In addition, the current drug is cheap, so even if the patient's insurer balked at covering an unapproved or (solely for the purpose of the US discussion) an "experimental" drug, the total cost would come in somewhere around $600. [Upon MSM request, I will provide the footnoted references for all of these statements, above.] It is true that, in theory, the US FDA could ask the doctor to provide evidence of safety -- and the doctor would simply point to two decades of treatment in Latin America -- of tens of thousands of acute cases in remission. But we might be talking about two or three actual acute patients in the US, over the next decade -- so, FDA is unlikely to intervene. People often forget that FDA has only limited jurisdiction when a doctor and patient agree on a course of treatment (after a full informed consent, documented in writing) -- so long as no US drug manufacturer is trying to influence that course of treatment, and the course of treatment is generally regarded as safe -- the US FDA has rather limited authority to regulate the doctor's private relationship with his or her patient. Got all that?

So -- now that all that background is laid out -- here is what makes KaloBios so interested in the old drug's approval in the US. If KaloBios submits a full blown new drug application, and runs clinical trials on the old drug, to essentially document the Latin American experience (and does so successfully), FDA will grant KaloBios a "neglected tropical disease" approval. What would come with that neglected disease approval (at least in theory, under FDA's recent rules) is a fully-transferable "FDA priority review" voucher, for any other drug candidate at all. [To be fair, this all has to do with the way the Congress enacted these changes. But I'll grant that the Congress-folk could not have foreseen the sudden rise of such an entirely feckless, purely charred-soul pirate, like Martin Shkreli, in my estimation -- which is how we've all landed right here, right now.]

Now, the take-away, for such pirateering? Well, the last such voucher issued sold for $325 million -- and earlier ones fetched between $100 million and $200 million. That was what Mr. Shkreli was angling for, in the days prior to his arrest in Manhattan. [Other large pharma concerns will pay dearly to cut in line, and effectively get VIP all-access passes -- shaving several months off of the overall FDA approval time-line for one of their other, true US blockbuster candidates-in-waiting.] My educated guess is that it might cost KaloBios $20 million to run the Chagas trials -- so a huge win.

You may ask why FDA would allow such a windfall/abuse -- all created from a disease (Chagas) that might only acutely affect seven people, nationwide. You would be right to ask, but what we see here (in the Shkreli/KaloBios case) is an outer-limits abuse of an otherwise complex set of recent regulatory changes. FDA should be applauded in my view, for trying to create real incentives to get large pharma concerns to address neglected diseases, especially in the Tropics. These amendments got their start in Congress. [Think now, about Zika virus -- such a program incentive could well speed development of a Zika vaccine, by the big pharma houses, even though they might never make their money back, in the US, on the vaccine itself. And, when developed -- just like the Ebola candidate vaccine -- it will have to be priced at a only few dollars per course of innoculation, to face the reality of the limited monetary resources in -- again, still developing economies (i.e., where the burden of disease falls most ponderously). I should note that Merck will be eligible to acquire just such a voucher, by bringing the NewLink-licensed Ebola vaccine candidate, through to approval by FDA.]

So the Congressional (and now FDA-administered) voucher idea is a sound one -- but may lead (as all things do, in my opinion) -- to abuses, at the margin.

I would also say in passing that I understand the people left at KaloBios (i.e., not Martin Shkreli) are trying to hold on to that company's only real shot at emerging from bankruptcy intact: that potential of a $300 plus million voucher sale/payday, some 18 months from now -- if all were to go well, in the Chagas clinical trials.

Now we come to Savant's part of the story, though. Savant affiliates have acquired the rights to the old Chagas treatment -- and claimed yesterday, in Delaware bankruptcy court, that they would still sell those rights to KaloBios, but only IF the court does NOT appoint a special Trustee over the bankruptcy, and potentially convert from a reorg, to a liquidation -- a Chapter 7.

I do understand that the Savant people are just protecting the certainty of their potential business deal. But I must point out that Mr. Shkreli's KaloBios signed a "partially binding" letter of intent with Savant, only 16 days before his arrest on seven felony securities fraud charges. He was well-aware of the FBI/DoJ/SEC investigation for several months prior to that time. So I must ask -- why wouldn't Savant seek a new -- more stable and reputable partner -- for this deal, from here forward? Savant, in the exercise of its own fiduciary duties, to its holders, ought to be looking for ways to terminate the "partially binding" letter of intent, or at least have second and third options under discussion -- should the bankruptcy court agree with the US Trustee (as advised by the DoJ and SEC) that only an independent Trustee will effectively sort out whether Mr. Shkreli's puchase of control of KaloBios was with fruits from his allegedly prior felonious conduct. [More on that, in the next installment.]

In closing (whew!), there is a BioPharma Dive article, this morning, on some of the bankruptcy issues -- which is good, as far as it goes -- (especially about Savant's potential for cold feet, here) but it doesn't remotely tell the rest of the story. That, I will tell right here, in the next installment. Probably after the Super Bowl. . . we will see.

Because pricing and access are two issues that cut across all of the life-sciences, I will cover this little microcosm created by Martin Shkreli, from time to time. [My partially-fleshed out, older backgrounder on it all, is here.]

Namaste, one and all -- and I just hope for a good close game on Sunday -- I'll be happy with either team prevailing. . . smile.

Thursday, February 4, 2016

Federal Propecia® MDL Update (NYED): Judge Gleeson Has Retired -- Case Likely To Be Reassigned To Judge Brian M. Cogan

I've waited about a week here, to blog this Propecia® products liability litigation update -- as I wanted to be able to pass along the likely name of the federal District Court Judge, also sitting in Brooklyn, to whom this MDL will likely be re-assigned.

Overnight, that formal suggestion was filed with the court. The recommendation to the Chief Judge is that the very able Judge Brian M. Cogan be assigned to MDL No. 2331. Here is that PDF file -- and here is a bit from the agenda, at which this possibility of reassignment was disclosed, as of last week:

. . . .1. Review PPO No. 10 Discovery and Trial Plan;

2. Update on judicial reassignment following the Honorable Judge John Gleeson’s retirement; and

3. Schedule the next status conference.

Dated: January 29, 2016. . . .

Now you know -- and onward, as Martin Shkreli tweeted (at 9:15 AM EST) that members of Congress are "imbeciles" -- at the same moment he was apparently taking the Fifth, in the Committee's hearing chamber -- and this, after promising his lawyer that he'd stop tweeting such garbage. I think a criminal Contempt of Congress charge may be brewing for him. . . perhaps more on that, late this afternoon, including the KaloBios angle on Chagas treatments -- now playing out in bankruptcy court. We've covered that before, so an update is in order. For now, though -- onward!

Wednesday, February 3, 2016

Color Me Skeptical Here -- Is It THAT Valuable To Pharma? Or, Will It (Further) Alienate The Doctors?

Okay -- first, Zephyr Health may well be on to a bleeding edge big data trend here -- and, I'll allow that if it can truly streamline a doctor's day -- and only match valuable introductions, on both sides, there is a quite-viable business model, here. But if (on the other hand) the "info-mercial" like tone of the below article is what the sales pitch is really like . . .well, you've been warned.

Having helped many a busy doctor, across many practices -- as their lawyer, for many years -- I suspect that the best and brightest will find this level of automated data mining. . . off-putting, at best. I note that the company doesn't have an internal general counsel, but has over one hundred employees, actively aggregating (what they claim is) real time health care provider-level data. That's. . . courageous. I am all for data-based decision making, but the idea that the pharma rep comes armed with all the data from your last ten visits, and prescribing patterns, from this very morning. . . well, that is troubling -- I think. But maybe I'm just old-school, here. Read the below snippet -- or the whole Bloomberg article, and pipe up, in comments: Does this rub you the wrong way? Do let me know.

. . . .Tracking ‘Valuable’ Doctors for Big Pharma. . . .

Pharmaceutical companies are now searching for ways to. . . target the doctors most compatible with the medications they’re pitching. "You’re desperate for data to make those key decisions," says Lance Scott, a former marketing manager at medical-device maker Abbott Laboratories. "But while there’s lots of data out there, it’s really challenging to bring it together." Scott’s now chief executive officer of Zephyr Health, a data analytics startup promising to help drugmakers identify key medical personnel and find ways to approach them.

Zephyr builds digital dossiers on individual doctors. It starts with basic information on prescription patterns from data clearinghouses such as IMS Health and Symphony Health Solutions. Then its software, with some human assistance, scours the Web for more details. For example, a calendar of speakers scheduled for a prominent medical conference may point to a specialist well-regarded by her peers. Steady publication by another doctor in scientific journals offers clues to the kind of research he does. A physician who’s a board member of an industry association might have a hand in writing treatment guidelines — and thus be the focus of a drug company’s outreach. . . .

Scott says Zephyr updates its physician profiles in near-real time, a serious advantage over hand-culled databases. His 100-employee team is working to refine the software’s predictive capabilities and add more data on which patients take what drugs. "There’s nothing private anymore. . ."

I completely understand why most life-sciences companies declined to be identified as clients of the service Zephyr Health offers. The opinion leader docs might well frown on it.

Gooodnight, one and all -- and sleep tight! -- I'm out.

[U] "Our" Merck Now Holds More Than 7.7% Of Newly Public BeiGene, Ltd. (An Immuno-Oncology Bet)

UPDATED: 02.03.2016 @ 5 PM EST -- Based on tonight's closing NASDAQ price of $28.32 (first full day of trading on the NASDAQ, for BeiGene, Ltd. American Depositary Shares), I calculate the 23.6 million shares that Merck affiliates now hold (when converted, 13 for one, to ordinary shares), as being worth well over $50 million. Of course, this is a paper gain at the moment, but not bad -- for an initial pair of $10 million loans, bearing 8 per cent simple annual interest, over four years (or around $29 million originally owed to the MSD affiliate, from BeiGene, if settled in cash). Not bad, at all. Well done, Kenilworth!

Friday Update: the final prospectus puts Merck's holdings at 7.7 per cent (see page 230) of all BeiGene's outstandings --- because the underwriters exercised a so-called Green Shoe option (for a long departed company!), and up-sized the offering. Now you know. [End updated portion.]

Ahem. We will back our way into this story: Back in February of 2011 (just four years ago, yesterday, in fact), an overseas affiliate of Merck made an initial $10 million loan to BeiGene, in China. The terms of that note have been restructured, increased and renegotiated a few times (with MSD-lent principal increasing to some $23 million), over the ensuing four years, and those terms now provide a convertible feature -- into a specified number of BeiGene's American Depositary Shares (i.e., freely trading) as of the time the IPO priced, but indeterminent, until then.

Overnight, that IPO was priced, and led by Goldman Sachs & Co., and Morgan Stanley. So, as of this morning, Merck is entitled to acquire well over 10 per cent of BeiGene, without making any additional payment, under the revised note terms, as of January 26, 2016.

We won't know until the IPO closes, and related SEC filings are made -- just how much of BeiGene the Merck affiliates own -- but this SEC Form 3 (also filed overnight) means that it will definitively be over 10 per cent. We will update, when that figure is known with certainty.

In the mean time, here is what BeiGene says it does, via its IPO prospectus -- ". . .[BeiGene is] a globally focused biopharmaceutical company dedicated to becoming a leader in the discovery and development of innovative, molecularly targeted and immuno-oncology drugs for the treatment of cancer. We believe the next generation of cancer treatment will utilize therapeutics both as monotherapy and in combination to attack multiple underlying mechanisms of cancer cell growth and survival. We further believe that discovery of next-generation cancer therapies requires new research tools. To that end, we have developed a proprietary cancer biology platform that addresses the importance of tumor-immune system interactions and the value of primary biopsies in developing new models to support our drug discovery effort. Our strategy is to advance a pipeline of drug candidates with the potential to be best-in-class monotherapies and also important components of multiple-agent combination regimens. Over the last five years, using our cancer biology platform, we have developed clinical-stage drug candidates that inhibit the important oncology targets Bruton's tyrosine kinase, or BTK, RAF dimer protein complex and PARP family of proteins, and an immuno-oncology agent that inhibits the immune checkpoint protein receptor PD-1 [emphasis supplied]. . . ." Well, that seems a close-fit with Merck's Keytruda program, no?

In passing, and in a footnote form, fraught with complications -- I will note that BeiGene ALSO has extensive relationships with the German Merck (Merck KGaA -- no relation). If I feel ambitious tonight, I may detail those -- but I will confidently guarantee that MSM outlets are going to confuse the one that owns shares (i.e., ours) with the one (i.e., German -- Merck KGaA) that is primarily conducting research collaborations with BeiGene. I didn't see anything that indicated Merck KGaA owned a substantial number of shares. But it might. Yikes! These folks need to solve that name confusion -- pronto.

The Deeper Dive -- How F/X Affects Merck's Gross Margins: 2015 Full Year Results

I'll take just a moment here, to discuss something I don't see other life science analysts talking about -- buried in Merck's full year results call, this morning. It is a bad news/good news sort of item (and it manifests itself at Pfizer, J&J, Abbott, Baxter, BMS and Lilly -- and all the others, to varying degrees). By now, regular readers know that (generally speaking) a strong dollar decreases reported revenue growth, in a US multinational like Merck. Kenilworth does a very good job of mitigating those gyrations with currency hedges. That's all true.

The more nuanced (and interesting) effect is -- when you look at Merck's two percentage point improvement in its full year gross margins, over 2014 levels -- the company attributes the bulk of that to F/X. [See toward the bottom of the press release -- last several paragraphs.] Decoded, that means that Merck is receiving asset-hedge "leverage" at the operating income line. Said another way, Merck's non-US operating assets are increasing in local value even a little more than reported US dollar sales (when reported back into the US, from non-US sources) are declining. Or, the non-US operating expenses are decreasing, more -- due to F/X gyrations -- when reported back into US dollars.

This (per force) leads me to three conclusions -- in turn: (i) Merck's continued gross margin improvements -- in the year 2016, and beyond -- may not appear in full, without continued strong dollar gyrations (i.e., unpredictable, non-recurring, largely external macro factors); (ii) with Congress and essentially all the credible candidates for President howling about price increases, Kenilworth will have tough sledding -- on any program of continual price increases, as a way to boost margins domestically; and so. . . (iii) without more bolt-on M&A deals, Merck is not likely to get significant gross margin improvement -- in the next (election cycle) year. The M&A will have to be for premium priced opportunities -- not the "also rans".

For what it is worth, this is true of the whole list of multinationals I rattled off, at the top, here. Of course, Merck is lucky to have Keytruda (a clear premium price garnering franchise), just as BMS is lucky to have Opdivo. But we already see that Merck is slashing prices, in the Hep C space, to try to take share from Gilead's premium priced Harvoni (and Sovaldi). This makes Merck's less than stellar full year 2015 sales numbers -- on Januvia and Janumet -- more than a little worrisome. And growth in Zetia now faces generic entrants in 2016 -- so that will not be of much help, either. Merck is still a great stock to own, at the mid $49-level (i.e., today's NYSE price), but that's my rather acidic take, on the press release, this morning. Onward -- with a huge grin!

Tuesday, February 2, 2016

Unconfirmed Rumors Department: Will Sanofi And Merck Part Ways -- And End Sanofi Pasteur MSD (EU Vaccines) Joint Venture?

IF (and the emphasis here is on "if") this is more than a mere rumor, we may well hear a bit about it on the earnings call tomorrow morning.

However, I suspect if serious talks are underway to unwind, they won't be announced until mid-summer 2016. The untangling of Sanofi and Merck operations (and cross-licensing vaccine know-how), could take quite a bit of time -- and one would not want to hastily pre-announce a split -- only to run into snags later. [Here is the last bit of strongly positive news out of the JV -- which we covered a full three years ago, now -- as background.]

On the other hand, to make a bit of a case for the split rumor, it is true that Merck did go it alone, on the Ebola vaccine, and Sanofi has its own complement of vaccines in the EU, which it doesn't share with MSD (US Merck's name over there). Add to this that there's been no JV revenue growth, in seven of the last eight quarters, and it might make more sense for Sanofi to buy its way out of the twenty year old JV. Here's a bit from Bloomberg overnight -- but do go read it all:

. . . .The joint venture, known as Sanofi Pasteur MSD, had revenue of about $330 million in the first six months of last year. It supplies almost half of Europe’s flu vaccines, as well as shots against shingles and the cervical cancer vaccine Gardasil, in Europe. Sales have grown in only one of the past seven quarters. . . .

I'll cover the year end results tomorrow pretty early. Onward!

Gilead Loses A Smallish Preliminary Round -- On Invalidity Of Merck's Sofosbuvir (In Vivo) Patents; This Case May Go To March 2016 Trial

It looks increasingly likely that there will be a patent invalidity trial -- in the federal District courthouse, in San Jose (Northern District of California), come early March 2016, on these issues.

Overnight, Gilead learned that it would not escape easily -- on a summary judgment motion (see this PDF file -- nine pages). Meanwhile, in the Delaware federal District Court, discovery spats continue, on these same patent matters. I still think both sides would be smart to settle -- but with Merck having fired a price-slashing shot across Gilead's bow, last Friday -- in these "next gen" Hep C marketing wars, there may just be too much bad blood, between the parties. Here is the operative bit, out of San Jose, overnight:

. . . .Since Gilead does not contest Merck’s motion for summary judgment, the Court GRANTS Merck’s motion [finding that Gilead infringes Merck's two patents]. As to whether the jury should be informed of the Court’s ruling on Merck’s motion, and if so, how it should be presented, the Court finds these issues are better left for the final pretrial conference. For clarity, the Court emphasizes that this ruling is only to infringement but not ultimate liability because of Gilead’s outstanding invalidity defenses. . . .

We may learn more, on tomorrow's earnings call -- and we are sure to hear about strong currency headwinds, then, as well. Will we hear that the rumor of a split/termination of the Merck/Sanofi EU vaccines alliance venture is more than a rumor? I don't know, but I'll blog that bit of Bloomberg innuendo, next.

Onward, as I am put in mind of a similar week, just 11 months ago -- and a blustery, odd-ball winter weather a'comin'-48-hour-period, for most of the middle of our nation. Mine included -- smile. As I say, face forward -- and. . . Onward!

Monday, February 1, 2016

The Year In US Pharma Lobbying 2015: Pfizer Spent Double What Merck Spent -- And Mostly On "Tax Loophole" Wideners (Like Inversions, And Deferrals Of Income Taxes)

Last week, I mentioned in passing that Pfizer's quite tardy third quarter lobby disclosures report had put it on a pace to double Merck's spend. That Pfizer indeed did, by year end 2015. Spent more than double. And spent more than four times what Apple spent, did Mr. Read.

As I've long said and written, trying to garner corporate welfare, in the form of narrowly tailored tax loopholes (but only for the "more equal" pigs -- like Pfizer), is a pricey proposition. This year, it will be all about protecting the "Pfilergan" tax avoidance windfall -- for Mr. Read. Note the much more statesman-like approach that Mr. Frazier takes, in tax lobbying (click this link, for just one example) -- the difference could not be more striking. In any event, I wanted to note it for the record, now that the data is in. Here is the relevant bit:

. . . .Deferral

Comprehensive Tax Reform

Territorial Systems

Tax Extenders

Patent Innovation Box

Cadillac Tax

Inversions. . . .

As I say, Pfilergan will generally not be a focus of this blog -- but where the contrasts are stark (or the similarities striking, as well, I suppose), we will remark upon it. Like tonight.

Oxfam: More Transparency Needed -- In Ebola Aid Delivery -- Perhaps $1.9 Billion Of $5 Billion Pledged Still Missing

I want to be quite circumspect here (at least for my own re-telling of this story) -- and not immediately suggest that the $1.9 billion has actually gone astray. [We have all read too many breathless stories that turn out to be baseless, of initially-missing aid (of all sorts) to Africa.]

It seems far more likely that -- due to fractured, and hurried aid efforts -- record-keeping took a bit of a back seat, and consequently, a portion of the $5 billion pledged last year just hasn't been reported as delivered, in-country, or spent yet, given that the main focus of a vast multinational effort had been arresting the epidemic, up to now.

It would be indeed deeply disheartening, to think (or later learn) that some governmental or charitable entities had failed to live up to their pledges -- so I will refrain from suggesting that, as well.

Even so, there is -- according to no less an authority than Oxfam International -- apparently about $1.9 billion in promised aid that it cannot establish has arrived, in country, for use against the now largely-abating Ebola scourge.

We will, of course, track this story closely, from here on. From the AP Wire Services, as of yesterday:
. . . .More than $5 billion was pledged by the international community as part of a special International Ebola Recovery Conference in New York last July. At least $1.9 billion of that "still has not been allocated to a specific country in a pledge statement let alone through more firm commitments to specific recovery programs. . . ."

Onward, now -- to a brighter, clearer, warmer tomorrow!

Sunday, January 31, 2016

Merck Likely Got A Tangible Benefit -- In July 2015 -- From Enhancing Mr. Kuhlik's Retirement Package (Gracious Concessions Department)

Back in late-July of 2015, I mentioned that it was curious that Merck's board was enhancing the retirement benefits to its GC, Bruce Kuhlik.

As I wrote then, in general, I'm of the opinion that Merck has greatly reformed the company's executive perks and pay practices -- especially compared to those that used to prevail at legacy Schering-Plough. [Afterall, this Merck IS the Schering-Plough legacy Delaware holding company, just renamed -- with Merck's legacy assets folded in. In fact, Merck long ago installed double triggers, for all its executive payouts, back when legacy S-P barely had a meaningful "single trigger". Remember, by 2006, Merck was pulling EARNINGS that regularly TRIPLED S-P's, despite dragging behind it, a much bigger base. For all of this, then CEO Clark earned less than a third (per year) of what that shine-ola salesman Hassan took from legacy Schering-Plough. But I digress.]

Having said all of that, the acceleration of Mr. Kuhlik's departing equity awards -- and that was what it was -- an acceleration, and fixing in cash, of the certainty of those awards. . . struck me then, as over the top. He was retiring in a well-planned, thoughtful succession, having prepared Michael Holston (for nearly two years, for his seat), and had already back-filled Holston's role, as Holston ascended -- with Ashley Watson, from HP, over six months prior to Kuhlik's own departure.

The board's proffered reasoning, in enhancing Mr. Kuhlik's normal retirement payouts, was that he would have to forefeit several large chunks of his equity compensation, post-retirement, if he took a certain class of federal public sector role, shortly after July 2015. The amount looked to me to be about $1.2 million, in benefits, at the time. I closed that July 2015 post, by saying I would hope Kenilworth might see some tangible benefits, from Mr. Kuhlik's payout. I guessed it might be some trade ambassador's role. In fact, the role is much closer to home.

Mr. Kuhlik is now (since at least mid-September 2015) the Senior Advisor to the Commissioner of the US FDA. Obviously, in that role, he helps the Commission decide on a whole host of compliance and approval process issues -- on all the drugs and devices and biologics over which it holds sway. Yes, I expect that Merck is garnering a tangible benefit from having his perspective represented -- front and center -- especially in cases where the full Commission decides NOT to follow an Advisory Committee recommendation.

So I will watch closely what happens with the question of a proposed label expansion for Merck's ezetimibe. You will recall that the Advisory Committee voted resoundingly against recommending that label expansion for Merck/legacy Schering-Plough. So. . . what might we (regular citizens) make of any subsequent full Commission approval of the new indication, since ignoring the Committee's suggestions is a very rare occurence. Rarer than hens' teeth, in fact. Should it happen, then Merck's enhanced payout would be quite a home run, in my estimation. Some $1.8 million in added money, to get perhaps an incremental $50 million a year, in revenue. Not too shabby -- so we are watching closely. Daily. Trust that, my friends.

I'll close out my slow Sunday evening post here, with one of my favorite blog quotes of all time. It involves Mr. Kuhlik (and Mr. Sabatino), while the Schering-Plough reverse merger was being negotiated -- in 2009. Hilarious -- flawless satire, penned by the clever folks at InVivo, back then. Do go read it, but "I'd like to have my lunch. . . buy me. . . ." Heh. Onward, into the first Monday in February, then. . . Merck earnings due mid week. Now, off to catch a live version of "Grease" on TV!

Friday, January 29, 2016

Merck: "Let The Hep C Cure Price Wars... Commence!"

As we had long predicted, since Kenilworth would be third to market, for this iteration of Hep C treatments, it would have to offer clear price advantages, compared to Gilead and AbbVie, in order to gain a meaningful toehold, in the vast US marketplace.

This morning, Merck announced exactly that pricing strategy, with its ZepatierTM having cleared FDA last evening. The Merck combo pill will be priced (in the US) at about 40 per cent less than Gilead's mega-blockbuster. So -- the approval is good news, and the revenue will be great for Kenilworth -- but the margins are not likely to be anything like those Gilead enjoyed last year.

In fact, it is almost certain that there will now be additional pricing pressure in the coming months, on all Hep C market participants. And Merck still must secure the approvals of pharmacy benefit managers, to get dispensed -- but at this price, and in a single combo-pill (i.e., the same as Gilead's Harvoni, but one up, over Abbvie's Viekira Pak -- a multiple pill offering) that is highly likely to occur. So, on balance, quite good news, for Merck. Here's a bit from Bloomberg, overnight:

. . . .Merck & Co. has priced its new hepatitis C drug, just approved by U.S. regulators, at a sharp discount to competing therapies from Gilead Sciences Inc. and AbbVie Inc., a move that could start a new price war in the field.

The U.S. Food and Drug Administration said Thursday that it approved Merck’s single pill, which combines the medications grazoprevir and elbasvir, after granting the drug a priority review in July.

The medication, called Zepatier, has a list price of $54,600 for a 12-week regimen, according to a Merck statement on Thursday. That’s 42 percent lower than Gilead’s Harvoni, which retails at $94,500. . . .

Happy Friday, one and all -- a fun-filled, busy weekend awaits, here!

Thursday, January 28, 2016

MSD (a/k/a Merck US) Strikes Its First Public Epigenetics Oncology R&D Deal: $15 Million In Upfronts -- Up To $515 Million, On Milestones

[First, just to be clear, this (MSD) is the name "our" Merck (US) must use outside the US and Canada -- and since this deal emanates from Australian and U.K. sources of tech, the correct way to refer to it -- from Kenilowrth's perspective -- is through MSD. Whew. Silly stuff, that. Check that link if you've forgotten about that cha-cha, already.]

FierceBioTech has a nicely-nuanced, well-told story out, now -- and truly, it is small, in terms of Kenilworth's committed funds -- only some $15 million in required Merck upfronts. But should the PRMT5 inhibitor enzyme pathway turn out to work well in arresting cancers, Merck would pay another up to $500 million on regulatory milestones being hit, and more in a running royalty, on all the eventual global sales. Still it is a good deal, because it presents only a small current period outlay, but one which would potentially generate a mega-blockbuster oncology product down the road -- like in 2020 or beyond. Read all about it, here:

. . . .The deal is Merck's first public partnership into epigenetics, the overarching science that governs heritable genes and how they express themselves. Thanks to the sprawling complexity of biology, people with the same genotypes can have widely ranging phenotypic traits, leading researchers to delve into the upstream processes that can effectively switch genes on and off in hopes of finding new therapies.

Merck's new compounds stem from work by Australian Cooperative Research Center for Cancer Therapeutics, based in Melbourne, with the support of the Wellcome Trust. The licensing fees will be spread out among the Australian center, Wellcome and Cancer Research Technology, or CRT, which is CRUK's commercialization arm.

"The deal provides potentially significant financial returns, which CRT will invest into life-saving cancer research, and most importantly will hopefully bring promising new drugs to cancer patients as well as those suffering from blood disorders where there are no effective treatment options available," Phil L'Huillier, CRT's director of business development, said in a statement. . . .

Onward -- with a grin. . . Friday's just around the corner!

As Predicted, Merck's Lobby Spend Increased In 2015 -- After A Few (Post S-P) Years Of Annual Declines

Even so, Kenilworth's spend is still less than half of Pfizer's annual lobbbyist spend. But as we've said, Pfizer's current lobby-agenda faces significant resistance on the Hill -- largely due to its tax re-domicile mega-deal ideas (during a Presidential election year). So, Mr. Read needs to spend heftily on that front, if he intends to get the Pfilergan deal closed, during 2016. [Thankfully, Pfizer has filed its year end reports on time -- unlike Q3 2015.]

As to Merck, in Q4 2015, the company spent on essentially the same initiatives it did in the first three quarters:

. . . .Trans-Pacific Partnership, data exclusivity for biologics. . . .

340B (no specific bill), Oncology education (no specific bill), adult vaccine policies (no specific bill), adolescent vaccine policies (no specific bill), DISARM (H.R. 4187), biosimilars (no specific bill), 21st Century Cures (H.R.6), FDA Regulatory Issues (no specific bill), general pharmaceutical industry issues, Innovation for Healthy Americans (no bill number). . . .

Comprehensive tax reform (no specific bill), international tax proposals (no specific bill), orphan drug legislation (S.1128), base erosion (no specific bill), territorial tax system (no specific bill). . . .

Medicare Part D (general education, no specific bill), changes to low-income subsidy structure in Medicare Part D (general education, no specific bill), Medicare Part B (general education, no specific bill). . . .

Intellectual property (general education), patent reform (H.R. 9, the Innovation Act; S.632, the STRONG Patents Act). . . .

Omnibus appropriations bill (general advocacy). . . .

Fairness to Pet Owners (S.1200), general animal health issues. . . .

So there you have it -- and, to wax comedic for a moment -- it pleases us to no end that Mr. Trump has thrown a hissy-fit (truly, do follow that link! Priceless!), and will "boycott" these last debates before the Iowa caucuses. He's a piece of work, that guy -- thinking he can dictate who gets to cover him, and what he gets asked, in a free speech enabled debate among candidates -- silly lil' xenophobic billionaire.

More seriously, we think it is bad for our Republic, generally, that he is even still being considered, by the electorate, however. But the summer convention will cure that -- as will the sharp blades of the establishment GOP, we think. We don't expect Mr. Cruz to survive as a candidate, through then, either. It will be. . . entertaining, at least. And truthfully, we think it now most likely that either Ms. Clinton (D), or Mr. Bloomberg (I) will be the 45th President of the United States, in any event. . .. Smile. Onward.

Monday, January 25, 2016

EXCLUSIVE: Martin Shkreli To Testify Before Congress Now On February 4, 2016

The very able US District Court Judge Kiyo A. Matsumoto, sitting in Brooklyn, has removed any legal impediment to Mr. Shkreli's appearance before the Chaffetz-Cummings Committee, as of a few moments ago. More formally, that committee is known as the House Oversight and Government Reform Committee. The newly minted CEO of Valeant will also testify. [More background, here.]

News Analysis: Having said that, it is highly likely that Mr. Shkreli will assert his Fifth Amendment rights, if the hearing is not held "in-camera". An "in camera", or "behind closed doors" session -- as to Mr. Shkreli's portion -- would essentially remove the threat of any evidentiary admission, in any subsequent criminal prosecution, or civil action -- for anything he might say to the Committee. All of his remarks would be granted the immunity afforded a member of Congress. Even Arnold & Porter would be hard pressed to advise him not to answer, in that case. We shall see. To be fair, Rep. Chaffetz likely wants it "in public" -- in part for the political points-making session. [Of course, should his testimony turn out to be knowingly false, he could still be prosecuted for perjury before Congress -- an entirely separate crime.]

In addition, instead of proceeding tomorrow, the hearing will occur on February 4, 2016 -- due to the Snow-ma-geddon still undulating through the nation's capital. [I have seen no other story on this -- so I'll call it an exclusive, for now. Alert me in comments if I am wrong about that.] I'd ask that you credit it -- if you run this. Graphics coming shortly.

. . . .The court modifies the conditions of Mr. Shkrelis bail as follows: Mr. Shkreli shall be permitted to travel to Washington, DC for the purposes of testifying before the United States House of Representatives Committee on Oversight and Government Reform hearing on February 4, 2016; Mr. Shkreli shall submit a copy of his itinerary, including any travel tickets and accommodations, to Pretrial Services in advance of his travel; and upon his return to the Eastern and Southern Districts of New York, Mr. Shkreli shall notify Pretrial Services. Counsel is cautioned that the court does not condone correspondence "seek[ing] the Courts's guidance." (ECF No. 25 at 1.) Any application to the court must specify the relief sought and include relevant legal authority in support of the application. Ordered by Judge Kiyo A. Matsumoto on 1/25/2016. (Gong, LiJia) Modified on 1/25/2016. . . .

Note also that (toward the end of the order) the able Judge chastised this Arnold & Porter lawyer -- for asking (by letter no less) for "guidance" -- in a criminal matter. That is not the role of a federal District Court Judge, not as to an indicted felony defendant, at least. Onward -- and Karma is clearly a wheel, Mr. Shkreli.

Compare & Contrast: CEO Frazier Sees "Flexibilty" To Do "Bolt-On" M&A Of $10B to $20B, In 2016

The now-declining valuations available to earlier stage biotech concerns -- should the same seek to tap the public markets (or even, increasingly, seek private equity backing) -- put the "strategic" industry multinationals with immaculate balance sheets (and great cash flow), in an enviable position.

Mr. Frazier is clearly right that his careful capital management over the years has Kenilworth in the driver's seat now, should it decide it wants to snap up a few of these "add on" acquisition candidates in 2016.

I might argue that this puts him (and Merck) in a better near term strategic position than Ian Read, over at Pfizer -- as Mr. Read is likely to be so tied up trying to clear the manifold regulatory authorities, on his single mega "re-domicile" deal, that Merck might just be able to start stealing franchises, here, one by one. Mr. Frazier's strategy for 2016 certainly presents a much smaller execution risk than Mr. Read's, in my view.

We shall see. But here is a bit, from Reuters, at Davos, Switzerland, last week:

. . . .U.S. drugmaker Merck & Co is eager to do deals to bring in promising experimental medicines and believes a recent correction in biotechnology stocks should throw up new opportunities.

"Prices have come back somewhat. That is a positive thing," Chief Executive Kenneth Frazier told Reuters in Davos on Friday.

"In particular, some of the early-stage companies are struggling to get the next round of financing as people start to be a little less willing to pay for the promise of growth, so that gives us opportunities. . . ."

"At our size, I would say a $10 billion or $20 billion deal would qualify as a bolt-on," he said in an interview on the sidelines of the World Economic Forum annual meeting. . . .

We will keep you posted. Meanwhile, here in Chicago, we feel the pain of our East Coast shovel crews -- but for once, we are kicking our heels up, and sipping our coffee and OJ -- free from that chore. We do feel for you Mike -- truly. Smile.

Saturday, January 23, 2016

More Detail -- From The Merck & Co., Inc. V. Merck KGaA Lanham Act Suit, In New Jersey

My good buddie, Ed Silverman (now writing for STAT, in Boston, at the Globe) has a very comprehensive run-down on the US part of these now-reignited battles. Do go read it, all.

In the mean time, I'll leave a link here, to the full complaint at law, a very large 5.5 MB PDF file, running some 78 pages. I must admit that I think the US Merck has the better of the argument, here. I also think, in time, things will get sorted out in England, as well, largely in US Merck's favor. [My backgrounder, here.] But here's a bit:

. . . .Over the years, disagreements have arisen between the parties relating to their respective uses of MERCK on the internet and otherwise in different jurisdictions and the parties have had a continuing dialogue which raised and, in certain instances, addressed such issues. Certain matters were not resolved between the parties and KGaA initiated litigation against Merck and related entities in 2013 in the United Kingdom, Germany and France. . . .

Merck [US] now brings this action based on KGaA’s activities in the U.S. as set forth herein. . . .

One of the issues that has not been resolved between the parties is the extent to which use of "Merck KGaA" would be made in the United States. Until recently, use of the Merck KGaA name has not been specifically directed to the United States and/or has not been used in connection with business activities that are in direct competition with Merck in the United States. . . .

Recently, KGaA has been making ubiquitous use of "Merck KGaA, Darmstadt, Germany," "Merck KGaA" and "MERCK" as a prominent feature of its branding in the United States, including use on websites which are specifically targeted to users in the United States (despite KGaA claiming that its operating companies in the United States today purportedly operate under the trade name "EMD") as well as on social media sites that are more broadly accessible, including in the United States. . . .

KGaA has taken a new direction and refocused its efforts on becoming a major player in the U.S. market, including specifically in the immuno oncology field where it directly competes with Merck, a well-recognized leader in that field. . . . In 2013, Stefan Oschmann, then head of pharmaceuticals for KGaA (and a former long term employee and executive of Merck Sharp & Dohme, its predecessors and/or affiliate(s)), stated that the U.S. was viewed as an emerging pharmaceutical market for KGaA and that the company was focusing on investing in its U.S. pharmaceutical business and developing new products to be offered directly by KGaA in the U.S. This was a departure for KGaA, as previously its pharmaceutical products in the United States were offered through “alliances” with other companies. . . .

On information and belief, KGaA has engaged in an intentional, increasing and continuous effort to undermine Merck’s rights and renown in the United States and to establish itself as "THE" Merck or the "ORIGINAL" Merck in the United States. . . . For example, KGaA recently launched a self-promotion campaign on websites directed to the United States dubbing KGaA as the “Original Merck” and featuring KGaA’s U.S. employees declaring their pride in working for the "ORIGINAL" Merck. . . .

As I say, this will all get sorted out, in due course, but using a 1970s-era agreement to address the seamless but complicated nature of the global internet-enabled economy for two very large companies competing in several of the same disease franchises, with very similar names, does not cast a very flattering light -- on either of these companies. This is -- and more importantly, was -- avoidable. Stay warm, one and all!

Friday, January 22, 2016

Sierra Leone 2016 Ebola Flare-Up: Tough News -- Second Confirmed Case In A Week

I suppose the only mote of softening news, here is that this latest new case arose in an already-known contact of the woman who died last week -- an aunt who provided the first woman -- with care. Thus, this flare-up remains definitively within the 100 or so known contacts, already being quarantined (voluntarily) and monitored, by local health- authorities.

Most of the 27 or so high risk contacts have likely already received Merck's vaccine candidate, as an emergency precaution (assuming they've consented to being part of the clinical field trial). Sadly, and in sum, we should prepare ourselves for more of this. It will require long term vigilance -- and significant changes in behaviors, among the exposed -- to avoid travel or other contacts for at least 42 days, and very proactive hygiene, more generally, in affected locales. Here's a bit from CNN, overnight -- do go read it all:

. . . .The two cases are connected. The latest patient -- a woman being treated in the capital, Freetown -- is an aunt of a 22-year-old woman who died of Ebola last week in Sierra Leone, World Health Organization spokesman Tarik Jasarevic said Thursday.

The aunt, who had cared for her sick niece, tested positive for the virus after developing symptoms while in quarantine Wednesday. . . .

Truly heart-breaking. But it will indeed take time, resolute safe practices, and patience, to completely tamp this latest flare-up all the way out. Onward -- do enjoy the snow -- and one anothers' company!

Thursday, January 21, 2016

"O/T For Friday" Space Science: NEW Planetary Discovery? Caltech Has It All [VIDEO] -- On A Snow Day

For those of us who were saddened by Pluto's demotion, a while back -- the daughter of Dr. Mike Brown, in the video below, is encouraging him to have this massive new candidate -- close to ten times the mass of Earth, and rocky at its core -- declared Pluto Prime. . . and that, all by itself, is grin-worthy!

As much of the nation hunkers down and stays home, avoiding rain changing to snow, sleet and ice storms, we encourage you to snuggle up -- and watch the Caltech story of Planet 9 unfold, before your eyes (about 2 minutes in duration):

Do stay safe, and dry and warm (all you precious cargo, on our little third rock). . . knowing we almost certainly have another son or daughter in the system, albeit traveling through an elliptical orbit spanning hundreds of generations of our own life-times. And that offspring, like another body of unwasted grace, serves as a "shepherd moon" (of sorts, though it is no moon, at all), to other little world-itas. . . fantastic! Be excellent to one another. . . it's almost the weekend!

Wednesday, January 20, 2016

In Which Forbes' Matt Herper Offers A More Serious Look -- At Martin Shkreli. Do Go Read It.

I had (again) planned a largely satirical piece for this evening, on one of Mr. Shkreli's uncanny abilities -- in this case, to alienate even top-notch, hard-boiled, expert criminal defense lawyers. [Yesterday Arnold & Porter filed papers in New York -- to withdraw, as his criminal counsel. Speculation in legal circles presently runs along the lines that his weekend TV interview on Fox 5 NY had made it very difficult to represent him -- given those very public statements -- from his own mouth -- that are at variance with what most sensible people would see as the likely truth, related to the matters involved. So (the speculation goes) the able firm indicated that it could no longer effectively handle his case -- again, the idle speculation runs, of course.] That was going to be the gist of this. But then Matt messed up all of that largely meaningless fun.

So -- as a grown-up, I'll devote more column space to Mr. Herper -- and ask you to read a far more sobering, and more broadly policy-shaping piece -- which he dropped into Forbes online, this morning. It will be in the paper version in early February 2016.

The notion is not entirely original, but Matt makes the case quite forcefully: Shkreli is not an abberation -- or an exception to the rule -- no, he is the rule. When pharma CEOs say they are not like him, they are of course right insofar as none of them stands accused of seven felonies -- and facing up to 20 years of federal incarceration. But, as Matt makes plain -- and I hinted at in September 2015 -- his price gouging is not uncommon in pharma. It is just dressed up -- in better linens, when the majors play the game. That's his thesis (and he deftly reiterates Shkreli's early and abiding devotion to one "Fast" Fred Hassan, and less so lately -- to Brent Saunders -- Hassan's protégé). So we had to mention it. Again. Do go read it top to bottom -- especially the part toward the end, about allowing direct governmental negotiations -- on pharma pricing. And on remimportation initiatives. Follow this link:

. . . .Martin Shkreli has a knack of saying exactly the thing that will make people angry. But the industry’s dirty little secret is that it is full of Martin Shkrelis, albeit less greedy ones with nicer shoes and more polished manners. They usually don’t raise prices on old drugs by 5,000%–just 50% or 500%. Over the past three years Merck’s price increases have amounted to 29% of its sales growth, Pfizer’s 34% and AbbVie’s 112%, according to consultancy SSR, which does health care research. . . .

This is pharma’s Shkreli problem. Yes, many new drugs must be expensive, or nobody would spend years and billions of dollars to invent them. But should Shkreli -- or anyone else -- be able to raise the price of a 62-year-old drug 5,000% in one fell swoop? What if he raised the price by just 200%? What if he made sure patients who can’t afford the drug get it for free -- as he claims he does? Or if he promised to put some of the money into research and development -- as he also says he does? Would any of this have made it okay?

We have a new measure for claims about drug prices: the Shkreli test. How would any justification for raising the cost of a drug sound coming out of Martin Shkreli’s mouth rather than smoothly parsed in legally vetted sound bites? Some price hikes, like those for innovative drugs, clearly pass. But many others don’t. . . .

[In 2012, Shkreli told Herper -- over lunch -- that he] wanted to invent drugs, and he’d started a company called Retrophin to do it. Shkreli initially got money to license a muscular dystrophy drug from investors including Fred Hassan, the legendary former chief executive of drug giant Schering-Plough, and Hassan’s protégé Brent Saunders. (Both now claim that their relationships ended quickly and Shkreli exaggerated their importance.) “The only person I needed affirmation from was Fred Hassan,” Shkreli told me then. . . .

For my part, I had said that Shkreli's odious behavior was just Fred Hassan's world-view, taken to its logical conclusion. That was in September of 2015 -- long before his rain-soaked December perp walk. And so -- I think the current leadership at PhRMA ought to be thinking now about making concessions to at least some of Candidate Hilary Clinton's points -- on pricing. The tide may have turned here, just as it did in mid-2008, on health care reform, more generally. We shall see.

Sleep tight one and all!

Merck's Ebola Vaccine Efforts Rewarded With GAVI Contract Support -- To Secure Global Approvals

My regular readers will recall that just over a year ago, HHS granted Merck's Ebola vaccine candidate so-called "PREP Act" suit-immunity, which essentially provides that Kenilworth won't ever face US claims -- for having been a Good Samaritan, here -- in producing the vaccine candidate, to respond to last year's devastating West African epidemic. Now, Merck will likely be at least cash neutral, as it seeks various global regulatory approvals -- from the commitments in this initial GAVI contract.

Until those approvals are secured, though, the vaccine may only be used to quell contact flare-ups, on an emergency basis. That is happening this week, in Sierra Leone, for just over 100 contacts of the latest reported victim of the virus. But in time, Merck might secure governmental/W.H.O. funding -- for wide scale vaccinations, in threatened populations. We shall see -- this could actually be a slightly profitable franchise -- even though that was not the original primary objective.

The newly-proactive global health approach -- from a wide array of interested parties -- is quite gratifying. Here's a bit from Reuters overnight, out of Davos, Switzerland -- but do go read it all:

. . . .If approved, Merck's so-called VSV-ZEBOV live attenuated Ebola Zaire vaccine would become one of the world's first licensed Ebola shots and Gavi would be able to start buying it to create a stockpile for future outbreaks, it said in a statement issued at the World Economic Forum in Davos.

"The suffering caused by the Ebola crisis was a wake-up call to many in the global health community," said Gavi's chief executive Seth Berkley.

"New threats require smart solutions and our innovative financing agreement with Merck will ensure that we are ahead of the curve for future Ebola outbreaks."

The deal was agreed on the understanding that the vaccine will be submitted for a license by the end of 2017.

Speaking to Reuters in Davos, Berkley said the advance commitment should give a positive signal to drugmakers developing products that may not have an immediate market

"It's critical that we give confidence to companies that when they make this type of effort, there is somebody to buy it," he said.

As part of the agreement, Merck will ensure that 300,000 doses of the vaccine are available from May 2016 to be used in expanded use clinical trials as well as for emergency use as needed while development work on the shot continues. . . .

Good news for all concerned. Enjoy the softly wheeling snowflakes around much of the mid-nation, this morning. . . smile. . . .